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Avoiding Financial Planning Mistakes for Special Needs Children

Worried about your special needs child’s financial future? You don’t have to be.

Here are six important considerations when planning for your child’s financial future:

Set up beneficiary designations properly: When designating beneficiaries for IRAs, company retirement plans, and insurance documents, specify that assets should be directed to the child’s Special Needs Trust and not to the child specifically. These designations supersede any directives you might note in your will, so it’s essential you set them up correctly.

Don’t fund a trust with the wrong kind of insurance: Term life insurance is a popular short-term option for parents but you should consider a permanent form of insurance such as whole, universal or variable life insurance as these are more cost-effective, long-term resources.

Direct assets to a Trust, not the child directly: If your child might need public assistance after they reach age 18, they may lose the right to Medicaid and SSI benefits if their assets total more than $2000. By ensuring all assets are directed intoa Special Needs Trust, your child’s money is kept safe and they can maintain access to benefits when they reach adulthood.

Document non-financial directives: While it’s important to protect your child’s assets, it’s also crucial that their other needs are met and they get the support they need in their daily lives. Create a document that lists their daily routines, favorite foods, doctors or specialists, friends and other important people in their lives or any other details that can help their caregiver provide a comfortable and stable life for your child.

Choose the best caregiver for your child: The family member you designate as your child’s guardian or executor should be ready and able to provide whatever care you’ve designated for your child. If you do not have a family member who is willing or able to provide for the child’s needs, designate an agency that specializes in services for special needs children.

Communicate with family: Make sure your extended family knows that you’ve set up a Special Needs Trust for your child. Let them know that any gifts should be directed to the Trust, rather than the child, or the child risks losing essential benefits.

Navigating financial planning for special needs children can be stressful and confusing, as there are many legal details to address. Learn how to protect your special needs child’s assets and future benefits by speaking with an experienced estate planning professional in your area.

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